Friday, June 7, 2013

What is the Concern with Deficits?

     After budget and tax season has subsided, there is still talk about deficits.  While it is a big topic in today's political spectrum, it seems to be blown out of proportion by many lawmakers.  The House's financial and budget wiz Paul Ryan's FY 2014 budget was set to shrink the deficit and get our national budget balanced in the next ten years.  This aspect has already been refuted by many economists and wonks alike.  There is no reason to balance the national budget.  The federal government has too much to worry about in its budget such as providing aide to disaster victims, education funds to states, funding healthcare, and several other complex components.
     Many Republican lawmakers believe the federal government should run more like a business or even a family.  In a recent issue of Rolling Stone, contributing editor Matt Taibbi articulated the sheer fallacy and madness of that very statement.  He writes that the argument that families should not spend more money than they take in is not comparable to how the federal budget should operate.  While Republicans on the Hill believe that the family model is comparable to our spending, he states they could not be more mistaken.  The United States has been borrowing for decades and it has not been a problem for us.  Our government has continued to sustain itself despite the fact we spend more than we take in.  The federal government cannot be compared to a family of four or a corporation because the federal government is its own separate entity.
     Another misconception Taibbi points to is John Boehner's statement that, in bankruptcy proceedings, the bond holders are paid first.  Boehner was trying to compare bankruptcy proceedings to our own budget.  He maintains that we are going to stay true to those from whom we have borrowed and pay them if we go under.  This would virtually leave millions of Americans out in the cold because Boehner is pledging allegiance to China (to whom we owe a great deal) before those who count on Social Security and Medicaid to get by.
     Ezra Klein for the Washington Post posted an article this week called "Now is the Time to be an Infrastructure Hawk, not a Deficit Hawk."  He cites the desperate need for infrastructure investment in our country and claims that now is the best time to do it.  Klein states interest rates are low right now, which is contrary to popular belief when referring to deficits.  He states the United States can borrow for five, seven, and ten years for next to nothing.  Interest rates will eventually increase which is why he believes now is the best time to invest in infrastructure before it is too late.  The United States has been in desperate need for infrastructure repair and an infrastructure overhaul would create thousands of jobs.
     Instead of concerning themselves with cutting the deficit and balancing the national budget, lawmakers should be trying to build our economy and shrink unemployment.  Another common misconception among the American people thanks to the scare tactics of the right is that our deficit has grown under Obama.  The fact is our deficit has shrunk under his presidency.  Jobs and the economy should still be the top priority.  When the economy is thriving, so is our government.  If the unemployment rate can be brought down to even four or five percent, then maybe the talks can shift to deficits, but for the time being, jobs still need to be in the forefront.
     The next big issue for the country is, yet again, raising the debt ceiling.  Politics could only get in the way of something so rudimentary in government as raising the debt ceiling.  In 2010, the GOP held the nation hostage and in return the S&P downgraded the United States from a AAA to a AA credit rating.  Now our interest rates are higher when borrowing money because our government was too unstable in something so simple as raising the amount of money we are allowed to borrow from other nations.  Republicans are at it again and do not seem to care that our credit rating could be down graded again.  They seem to think that they have all the answers to fiscal responsibility and cutting deficits yet nothing could be more irresponsible than defaulting on our debt.          
     Dick Cheney once said that deficits do not matter.  As the issues seemingly get more complex, there is always a simpler solution.  Deficit reduction should not be the nation's top priority right now.  Yes, the deficit has shrunk marginally but there is still headway to be made.  Still, the major issues are jobs and the economy.  The only real path to prosperity and fiscal responsibility is to invest in the economy, jobs, and the middle class.   

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